Developmental progression of thymocytes and thymic epithelial cells (TECs) is an interdependent process in which the maturation of each cell type depends on reciprocal inductive interactions mediated by cellular contact and/or soluble factors. In contrast to the extensive literature characterizing thymocyte development, much less information is available concerning the nature and function of TEC subsets. Given the critical role played by TECs in T cell development, it is vitally important to elucidate the mechanisms by which thymocytes and TECs interact in developmental regulation. Therefore, the major objectives of this proposal are to establish lineage relationships among TEC subsets and to define the interactions between T cell progenitors and TECs that induce developmental maturation of both cell types in the cortical microenvironment. Using keratin (K) expression patterns to identify TEC subsets we find that contrary to conventional dogma, cortical TECs are not homogeneous, but instead contain a predominant K8+K5- subset and a minor K8+K5+ subset. Both cortical TEC subsets are present in Rag-1-/- and TCRbetaxdelta-/- thymi in which T-cell development is blocked at the CD4-8-25+44- pre-T cell stage. In contrast, K8+K5+TECs predominate in the thymi of hCD3epsilon transgenic (tg) mice in which thymocyte development is blocked at an earlier CD4-8-25-44+ stage. Transplantation of newborn hCD3epsilon tg thymi under the kidney capsule of Rag-1-/- mice results in the emergence of K8+K5-TECs concomitant with the appearance of CD25+ thymocytes. These data suggest that cortical TEC development proceeds from a K8+K5+ precursor subset to a K8+K5- stage in a differentiation process that depends upon T-cell lineage commitment. We also show that the developmental window during which thymocytes induce the formation of a normal thymic cortex in hCD3epsilon tg mice is extended by enforced expression of a cyclin D1 transgene in TECs. The results obtained to date suggest a plausible model for TEC developmental progression that provides the basis for the following testable hypotheses. (1) A primitive K8+K5+ subset located primarily at the cortico-medullary junction contains precursor activity for functionally distinct cortical and medullary TEC compartments. A corollary to this hypothesis is that expression of a cyclin D1 transgene in K8+K5+ precursors enhances TEC differentiation in response to thymocyte influences by increasing and/or maintaining the fraction of cycling progenitors. (2) The process of T-lineage commitment is required to induce the differentiation and expansion of TEC precursors into two cortical subsets by direct contact and/or elaboration of cytokines.